Transcript: Peloton Interactive Q4 2026 Earnings Conference Call

Peloton Interactive (NASDAQ: PTON ) held its fourth-quarter earnings conference call on Thursday. Below is the complete transcript from the call. This content is powered APIs. For comprehensive financial data and transcripts, visit View the webcast at Summary Peloton Interactive reported positive financial performance for FY26, achieving its first full year of positive net income and operating income, with $63 million net income and $161 million operating income.

The company introduced new strategic initiatives centered on evolving from a connected fitness company to a connected wellness ecosystem, aiming to capture a share of the $7 trillion wellness market. Peloton launched new products and programs, including the Cross Training Series and Peloton IQ, and saw increased engagement in Pilates workouts, leading to the acquisition of Scope to enhance R&D in this area. The Commercial Business Unit (CBU) showed double-digit revenue growth, and Peloton plans to launch the Peloton Commercial Series to accelerate growth in commercial gyms.

FY27 guidance includes the highest projected total gross margin, adjusted EBITDA, and net income in the company's history, with expectations of new product launches in FY28 to further expand market opportunities. Peloton maintained strong member retention despite a slight uptick in churn in Q4, with expectations for churn rates to moderate over FY27. 4 billion and a minimum free cash flow target of $350 million. The company plans to expand its microstore presence and enhance partnerships, such as with Spotify, to increase brand exposure and test demand in new geographies.

Management emphasized the potential of Peloton IQ in driving engagement and retention through personalized AI-driven insights and recommendations. Full Transcript OPERATOR Good day and welcome to Peloton's fourth quarter and fiscal year 2026 conference call. At this time all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session.

To ask a question during the session you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 11 again. Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker, Mr. James Marsh, Senior Vice President of Investor Relations. Please go ahead. James Marsh, Senior Vice President of Investor Relations Thank you, operator.

Good morning and welcome to Peloton's fourth quarter and fiscal year 2026 conference call. Joining today's call are Peloton Chief Executive Officer and President Peter Stern and our new Chief Financial Officer Siddharth Thacker. Our comments and responses to your questions reflect management's views as of today only and will include forward-looking statements related to our business under federal securities law. Actual results may differ materially from those contained in or implied by these forward-looking statements due to risks and uncertainties associated with our business.

Please refer to our SEC filings, today's press releases and our earnings presentation, all of which can be found on our investor relations website, for a discussion of material risks and other important factors that could impact our results. All results discussed today are on an as-reported basis, which include our previously mentioned cost reassignments that began at the beginning of fiscal '26. Please refer to our investor presentation for reconciliations of the impacts of these cost assignments. During this call, we will discuss both GAAP and non-GAAP financial measures.

A reconciliation of GAAP to non-GAAP financial measures and definitions for our user metrics are also provided in today's press release. I'll now turn it over to Peter. Peter C. Stern, CEO & President Thanks, James, and good morning, everyone.

As my first full fiscal year comes to a close, we enter the new year with a strong financial and operational foundation. FY26 was filled with product innovations, exciting additions to our leadership and instructor teams, a new company strategy, and more ways than ever to help our members live fit, strong, long, and happy. We've also made meaningful progress on our journey to evolve from a connected fitness company to a connected wellness ecosystem. This ambition defines the future of Peloton and positions us to participate in a $7 trillion global market centered on longevity and health span.

Our magic formula of premium hardware, intuitive software, world-class coaching, and supportive community powers our beloved brand and gives us permission to gradually and systematically capture share in the broader wellness market in the years ahead. Our strategy is built on four pillars: 1) improving member outcomes, 2) meeting members everywhere, 3) making members for life, and 4) business excellence. I'm proud to report that we continue to make substantial strides across each of these pillars, starting with improving member outcomes, which is where we focus on human impact—improving our members' fitness, strength, longevity, and happiness.

The more we help our members achieve these outcomes, the more we fuel retention. A key driver of this is our product innovation. In FY26 we introduced the Cross Training Series, a refresh of our products across Bike, Tread, and Row, and we launched Peloton IQ, a huge step forward in our use of AI to deliver a more personalized experience to our members. In Q4, more than 50% of monthly active users engaged with personalized guidance powered by Peloton IQ.

Our product innovation engine is now firing on all cylinders, and during this calendar year we will launch additional new equipment, an existing category, while delivering much more customized, personalized guidance to help our members achieve their individual goals. We also continue to innovate on our programming, for example by expanding our specialized content with offerings like the Pace Your Race marathon training program and HILIT Plus, a very popular high-intensity, low-impact cross training program. These class and programming additions directly reflect the engagement trends we're seeing from our members.

Speaking of engagement, in Q4, Pilates workouts and workout time were up year over year by 44% and 53%, respectively. Given this rapidly growing member demand, in Q4 we executed the acquisition of Scope, an early innovator in connected Pilates with foundational technologies and deep expertise. This move will enhance our R&D efforts and enable us to deliver even more distinctive experiences in this category. The second pillar of our strategy is to meet members everywhere.

We know Peloton members are deeply connected to their community, instructors, and class programs, and we're committed to bringing our experiences to them wherever they are. Formed just a year ago, our Commercial Business Unit has become central to this strategy by increasing our reach outside the home and in more hotels and gyms across our key markets. Our CBU delivered double-digit year-over-year revenue growth in fiscal 2026, with growth across all regions and across all major product categories.

We estimate that we're approaching 4% of the commercial fitness equipment market segment, leaving enormous headroom for growth, and we are encouraged by the increasing demand for our products. In the next few months we will launch the Peloton Commercial Series, the first Peloton Bike and Treadmill built to accommodate the duty cycle of high-traffic commercial gyms. We anticipate that with the benefit of this new equipment, alongside additional investment in our CBU sales team and product development, we will see accelerating growth from the CBU in fiscal '27 and beyond. Another way we meet members everywhere is through our retail stores.

We ended the year with a highly capital-efficient footprint of 10 microstores, which consistently outperform our historical fleet of legacy showrooms. Based on this success, over the past few weeks we have launched three additional microstores, and we plan to add an additional seven microstores in time for the holidays, which would result in a doubling of our microstore footprint. This year we are also meeting members everywhere through our strategic partnership with Spotify.

We are now delivering our non—equipment-based classes, such as strength, Pilates, barre, yoga, meditation, and outdoor running and walking, to hundreds of millions of premium Spotify subscribers around the world. Partnerships like the one with Spotify enable us to build our brand and test demand in new geographies. S. with our content on Spotify.

Lastly, meeting members everywhere also includes meeting members in real-life events and activations. This year our instructors represented Peloton in more than 160 events worldwide, a more than threefold increase year over year, including major marathons in New York, Berlin, and Sydney, as well as premier wellness festivals and run clubs. Our third pillar, Members for Life, focuses on maximizing lifetime value and keeping our members active and engaged. 316,000 of our members now own multiple connected fitness products, up more than 20,000 year over year, and these members churn at significantly lower rates than those who own just one.

As a result, not only are new products meant to attract new members, but they also keep our existing ones with us for longer. We're also driving member loyalty through Club Peloton, which our members have deeply embraced. Since its October launch, Club Peloton rewards were applied to 70% of apparel sales on our site in June. We continue to evolve this program, and in Q4 we launched new milestones and weekly streak badges to celebrate our most committed members.

We remain proud of our strong member retention. While we saw an uptick in Q4 churn, driven in part by one-time events, we expect our year-over-year churn rate to moderate over the course of FY27. On a full-year basis, we expect churn to be roughly flat versus FY26. Last but not least is business excellence.

When I started at Peloton, I explained we'd see consistent progress from the bottom of the P&L up. This past year we made material improvements in our financial and operational foundation, and I'm pleased to share that we have delivered Peloton's first full year of both positive net income and positive operating income, at $63 million and $161 million, respectively. In addition, we delivered $468 million of adjusted EBITDA, an increase of $65 million, or 16%, year over year, and $378 million of free cash flow, an increase of $54 million, or 17% year over year. This profitability growth reflects the significant progress we've made in improving our cost structure.

We committed to a $100 million run-rate cost savings initiative in FY26, and I can report that we exceeded this goal. Moving further up the P&L, we're pleased to have achieved our second consecutive quarter of year-over-year revenue growth in Q4. Turning to FY27, our core business trends continue to improve and our business is the healthiest it has ever been, as we're projecting the highest total gross margin, adjusted EBITDA, and net income in the company's history. And looking beyond FY27, I'm excited about our multi-year product roadmap of both consumer and commercial products.

This roadmap includes groundbreaking offerings in entirely new categories that broaden our total addressable market. The first of these new consumer product categories will launch in the fall of 2027, followed by more thereafter. We expect investments in these categories will result in an acceleration of our year-over-year revenue trajectory. Delivering breakthrough product innovations takes time, especially hardware like ours, but we're investing with discipline in areas where we have confidence in the returns.

I'm proud of our progress over the last 18 months in filling the product pipeline. This work makes me deeply optimistic about Peloton's future and our team's ability to execute on our next chapter. This is what a successful multi-year business transformation looks like, and I want to share my gratitude to Peloton team members, partners, shareholders, and members for taking this journey with us. With that, I'm pleased to introduce our wonderful new Chief Financial Officer, Siddharth Thacker, who will share more details with you.

Siddharth Thacker, Chief Financial Officer Thanks, Peter. Before I begin, I wanted to share how thrilled I am to be on this journey here at Peloton Interactive. The company has many strategic advantages: its iconic brand, industry-leading instructors, and its deeply loyal community. And I'm looking forward to working with our team members to build an even stronger Peloton Interactive.

Before joining, I knew we had real work to do to improve our growth trajectory and that getting this business back to sustained growth wouldn't be immediate. But since I started, two things have become very clear to me. The first is that the underlying strength of this business and brand are real. We benefit from enviable churn, providing a high-margin recurring revenue stream, which provides the foundation for our free cash flow generation.

Our brand remains exceptionally strong, with all of our Cross Training Series products measured having an NNPS score above 70 on a scale from -100 to 100. The second is that our teams have a solid strategy along with an excellent grasp of the work ahead and how it will drive value. I've been thoroughly impressed by the quality and maturity of the company's innovation pipeline. As Sita mentioned, we have high-potential products in the works that target a much expanded addressable market, giving us real, tangible growth engines for the future.

Additionally, I see a sizable and immediate opportunity with our commercial business units to drive profitable growth. In terms of a capital allocation strategy, I see significant cash generation at Peloton Interactive in the years ahead, giving us the resources to invest in future growth while also deploying capital to benefit shareholders in the near term. We are already working toward a refinancing of our balance sheet and have begun the process with our bankers. We'll have more to report back in the coming weeks.

Recognizing that August is a slow month for capital markets activity, ultimately we find ourselves in an excellent position to capitalize on the growing fitness and wellness market. Our best-in-class innovation pipeline, paired with an improved financial position and a highly talented, collaborative team, makes the path forward clear. We know the work ahead of us, we know how to execute, and we are moving quickly. 553 million ending paid Connected Fitness subscriptions within our guidance range.

2% reflects an increase of 37 basis points year over year. Seventeen basis points, or roughly half of this headwind, are the result of one-time factors, most notably a change to our payment reactivation algorithm that we made in Q3 that had an unanticipated adverse impact on reactivations from involuntary churn in Q4. We addressed that change last month and have since observed a normalization of our involuntary churn. Looking ahead to fiscal 2027, we expect churn to be roughly flat year over year.

On a full-year basis, total revenue was $608 million in Q4, which outperformed at the high end of our implied guidance range by $6 million and reflects slight but nonetheless positive year-over-year growth. Outperformance relative to guidance was driven by higher Connected Fitness equipment sales across Peloton and Precor brands. Total gross profit was $344 million in Q4, an increase of $16 million or 5% year over year. 7% in Q4, an increase of 260 basis points year over year and roughly in line with our Q4 implied guidance.

Please refer to our investor presentation for the segment-level breakdowns for revenue and gross margin. Total adjusted operating expenses, which exclude restructuring and impairment expenses, were $257 million in Q4. Excluding the impact of $24 million of non-recurring accrued legal contingencies related to patent litigation, adjusted operating expenses decreased $29 million or 11% year over year, reflecting the continued progress we've made in right-sizing our cost structure.

We remain focused on managing dilution through a disciplined approach to equity compensation, which includes changes in our program design and tying more stock-based compensation to financial performance. Our stock-based compensation expense was $43 million and decreased $10 million or 19% year over year in Q4. This represents the lowest stock-based compensation we've had in many years. As Sito noted, we exceeded our goal to achieve at least $100 million of run-rate cost savings by the end of fiscal 2026.

Adjusted EBITDA for Q4 was $142 million, or 23% of total revenue. Excluding the $24 million impact from accrued legal contingencies related to patent litigation, adjusted EBITDA would have been $166 million, an increase of $26 million or 19% year over year and $12 million above the high end of our guidance range. Q4 free cash flow of $89 million represented a decrease of $24 million or 21% year over year, primarily related to net working capital timing. On a full-year basis, we generated $378 million of free cash flow in fiscal year 26, an increase of $54 million or 17% year over year.

21 billion, an increase of $167 million year over year.